Development Of Shishi Garment Industry

Shishi, Fujian, is a famous clothing capital in China. Its clothing industry began in the 60s of last century.

Gradually from the primitive simple form to the mature development process, the corresponding financing methods in various stages of development have undergone a gradual evolution process.

The period of assessment booth (before reform and opening up)

Shishi is located in the "wind tail water". The area of cultivated land is very limited, and natural disasters happen frequently.

Simple agricultural economy can not maintain people's livelihood. Stone lions are forced to drift across the sea and leave their homes.

Overseas Shishi overseas Chinese and their hometown have been in frequent contact with each other for a long time. These overseas Chinese have sent overseas goods back to their hometown, while some residents of Shishi local have opened shop to set up their stalls, so the original small commodity market was born.

At that time, these small traders had reached more than 600, and the old "Western-style clothes" became the main selling products.

Gradually formed.

Despite historical reasons, Shishi's small commodity market has been attacked many times, but it is still developing in twists and turns.

By the year 1975, the individual traders of Shishi had developed to more than 1000.

The rise of this market is seen as a "flood of capitalism".

After repeated criticize, the individual stalls were basically cancelled.

At this stage, the level of financial development is suppressed, and credit cooperatives do not provide personal financial support.

Shishi individual traders basically rely on their own funds to operate "assessment booth", rarely external lending relationship.

The forming period of competitive advantage in garment manufacturing industry (1979~1987 years)

In 1979, China's customs relaxed the restrictions on overseas Chinese visiting relatives and belongings, and a large number of overseas materials entered Shishi.

Among them, the "western dress" is cheap and fashionable, attracting buyers from all corners of the country. Some of the stone lions began to use their own factories and idle funds to form a small family factory in the form of joint stock. They mainly imitate and put on the market for the western-style clothes, and gain considerable economic benefits.

With the increasing production, self produced goods gradually replace imported products.

By 1984, Shishi Town garment factory has developed to more than 300, with a production value of 19 million 500 thousand yuan, and a large number of "domestic products" have been put into the commodity market of Shishi, with more than 1500 clothing stalls and nearly 25 million yuan of trade volume.

The increase of garment manufacturers has brought fierce competition in the market. In order to attract more customers, more and more enterprises are focusing on improving the competitiveness of enterprises, focusing on clothing design, introducing advanced equipment, strengthening quality management, and improving the competitiveness of the whole industry.

By the year 1987, there were 592 large and small enterprises in Shishi, more than 3400 individual traders, 164 enterprises in the field, and 12 enterprises in various markets, 2801 in all kinds of commercial and service outlets, 11366 employees, and 262 million 637 thousand yuan in annual turnover.

In this stage, the credit cooperatives provide some financial support for the development of state-owned enterprises and collective owned garment enterprises, and the sources of funds for individual garment enterprises mainly come from private lending.

Enterprises still rely on endogenous financing.

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The rapid expansion period of garment industry (1988~1992 years)

Since the approval of Shishi City in 1987, Shishi's policy has been more flexible, bringing unprecedented opportunities for the development of Shishi garment industry. By 1991, the city already has more than 1600 large clothing and related supporting enterprises.

At the same time, the apparel industry began to expand its market actively.

After 1990, Shishi enterprises began to set up a large number of clothing sales outlets throughout the country.

By 1992, Shishi clothing enterprises set up offices in 28 provinces, municipalities and districts throughout the country, and established 1500 sales counters in more than 20 large and medium-sized shopping malls, and over 2100 supply and marketing personnel all over the country.

Agencies have been set up in more than 60 countries and regions, forming a huge sales system linking the whole country and abroad.

During this period, the level of financial deepening was gradually raised, and the banking system was initially liberalized.

In 1988, the branches of the four major state-owned banks have just settled in Shishi. The business of the formal financial institutions has not been fully developed, and the funds they can provide are limited. The financial services provided by the rural credit cooperatives are not yet mature.

At that time, the total amount of loans provided by the financial institutions was only 192 million yuan, which was unable to meet the funding gap by formal finance. Under such circumstances, the non-governmental financial model represented by the bidding committee played a key role in filling the funding gap.

At that time, there were more than 2000 bid associations in Shishi. The number of heads and meetings of the bid committee reached 7002, including 2376 heads and 4626 feet.

The debt will be 637 million 374 thousand yuan and the debt amount is 585 million 56 thousand yuan.

The amount of debt was 3 times that of the financial institutions at that time.

Adjustment stage (1992~1998 years)

After 1993, with the further improvement of China's productive forces and the end of the era of economic shortage, the demand for clothing products began to decrease, and the garment industry in Shishi has entered the stage of adjustment.

In 1994, there was a significant decline in the stone lion clothing industry, the output of clothing decreased by 29.6% compared to 1993, the output value was 12.2% lower than that in 1993, and the production and halt production enterprises accounted for 52.3% of the garment enterprises in the city.

In the process of fierce competition and adjustment, the dyeing and finishing industry and the textile industry began to develop.

By 1998, there were about 421 textile and dyeing and finishing enterprises in Shishi, marking the beginning of the integrated development of Shishi garment industry.

From the second half of 1992 to the second half of 1994, the financial system of the garment industry in Shishi has also ushered in a new round of changes. The most notable symbol is the establishment and development of the rural cooperative foundation and the urban credit cooperatives.

Urban credit cooperatives have the advantage of clearer property rights, and they are more easily accepted by local people and have the advantage of "villagers in the countryside".

At that time, a total of 7 urban credit cooperatives were established. By the end of 3 1999, the balance of deposits of urban credit cooperatives reached 1 billion 845 million yuan, accounting for 28% of the total deposits of Shishi financial institutions at that time. The balance of loans reached 1 billion 393 million yuan, accounting for 30% of the total loan balance.

At this stage, the rural cooperative foundation also provided a large amount of funds for the Shishi garment industry.

The rural cooperative foundation was originally designed to provide financial support for agricultural production and farmers' services in the community. It is not an institution set up solely for supporting an industry or providing financial services.

However, in view of the actual situation, as the speed and capital demand of local agricultural development in Shishi lags far behind the development of garment industry, in fact, the rural cooperative foundation will become a financing institution for small and medium-sized enterprises in the cluster.

These funds are mostly set up in the urban area, and can be used to deposit and loan businesses. They become an important channel for small and medium-sized enterprises in the apparel industry cluster. As of April 1999, the term fund and proxy shares of the rural foundation reached 196 million yuan, the number of deposits reached 4254, the total amount of loans reached 86 million 500 thousand yuan, and the number of borrowers reached 341.

At the same time, the formal financial system represented by commercial banks has gradually developed and matured. The deposit and loan business of commercial banks has seen a rapid growth. The large scale and well-known clothing enterprises in the cluster have established a relatively stable lending relationship with banks.

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Brand management strategy development stage (since 1998)

After 1998, some enterprises began to stand out and become the "leading sheep" of Shishi garment industrial cluster.

Up to now, famous brands such as rich birds, AI Deng Bao and Halliday have emerged. There are more than 2000 registered trademarks, 2 well-known trademarks in China and more than 40 famous trademarks in Fujian.

Brand innovation has increased the value added products of Shishi garment industry, the quality and grade of products have been improved, and the volume of products has increased.

In December 24, 2002, Shishi was named the "famous Chinese leisure clothing city" by the China Textile Industry Association.

At this stage, the market expansion ability of Shishi garment industry has been enhanced significantly, and the pace of "going out" has taken the lead.

In recent years, Shishi garment industry has made positive progress in opening up the international market.

With the advantage of neighboring Taiwan, a cross-strait textile and clothing exposition has been held every year since 1995, expanding the communication with the international market.

Many enterprises have entered the international market by setting up joint ventures, producing licensed products with famous foreign Brand Company, and designing direct exports by themselves.

In 2001, Shishi's export sales revenue reached 198 million US dollars, and the total value of self operated exports reached US $92 million 554 thousand and 400, and the proportion of export sales accounted for more than 50% of the output value of textile and garment industry.

At this point, Shishi clothing entrepreneurs realize that grabbing market share will become the key to the rise and fall of enterprises, and the cost of construction of the marketing network, brand design and advertising is no longer a problem that banks can solve by providing loans.

Enterprises with a certain scale within the cluster begin to make use of the capital market to finance.

The seven wolves industrial Limited by Share Ltd listed on the Shenzhen Stock Exchange's small and medium sized boards in 2004, becoming the ninth listed companies in the small and medium-sized board. It is also the first enterprise listed in Shenzhen in Fujian.

Seven wolves industrial Limited by Share Ltd financing IPO in the capital market 186 million yuan, in 2007, additional financing 599 million yuan.

Because of the high threshold of listing in China, some companies chose to list abroad, such as the successful listing of the company in the US NYSE in 2010, and the first Chinese men's clothing manufacturer to visit the US IPO.

From the perspective of evolution, the demand for capital is closely related to the development of market competition.

From the extensive operation in the market environment which is short of supply in the early stage, and to the current fierce competition, we should pay more attention to product innovation design, enterprise management and mergers and acquisitions.

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After a long period of development, the garment industry in Shishi has grown and formed the characteristics of complete industrial chain and high concentration of industries. At the same time, the coexistence pattern of large, medium and small enterprises has been formed.

Shishi clothing industry covers a complete industrial chain from textile, accessories production, dyeing and finishing, garment manufacturing, western style clothes, casual wear, high school and low-grade clothing and so on. Moreover, Shishi is not big in area and highly concentrated in industry. At the same time, there are not only famous clothing manufacturers at home and abroad, but also a large number of small and medium-sized enterprises and micro enterprises in the Shishi garment industry cluster.

In view of this characteristic, the current financing mode of Shishi garment industry cluster should focus on the following aspects:

Bank financing is still the main financing mode in the medium and long term.

Banks are the foundation of the stability of the whole financial system and the most important part of the enterprise's capital supply.

Bank loans are still the most important form of financing from small and medium sized enterprises to large listed companies. Especially for small and medium-sized enterprises, nearly 70% of the external financing source is bank loans.

From the data of deposit and loan of Shishi's formal financial institutions in recent years, the level of financial correlation is higher than that of the whole Quanzhou area. This indicates that Shishi has a good capital base and can provide support for the overall economic growth.

In recent years, this index has a downward trend, which may be related to the acceleration of Shishi's gross domestic product. However, according to the deposit loan ratio index, the loan to deposit ratio of Shishi's financial institutions in recent years is significantly lower than that of the whole Quanzhou area. Especially in 2012, the gap between the two countries is further widened, and loans in Quanzhou reach more than 70% of deposits, while Shishi is less than 60%.

A higher financial correlation rate and a lower deposit to loan ratio indicate that a large number of deposits in Shishi remain idle and do not lend.

Banks and other institutions failed to give full play to the role of funds. There is a certain phenomenon of financial restraint in Shishi's formal finance.

An important reason for this phenomenon is the large and medium sized enterprises whose bank loans are highly concentrated in the output value of hundreds of millions of dollars, while a large number of small and medium-sized enterprises are increasingly showing the problem of financing difficulties.

In view of this, we should take the government as the leading factor, increase the policy guidance to banks, enhance the enthusiasm of banks to participate in the financing of small and medium-sized enterprises, increase the support of banks to small and medium-sized enterprises, make banks remain the main way of financing for enterprises in the medium and long term, and effectively enhance the support of banks to enterprises.

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Private lending as an auxiliary form of financing for small and micro enterprises

At present, banks are generally reluctant to lend loans to small and micro businesses with high risks and low returns.

In view of this, it is necessary to use the primitive financing method of private lending as a supplementary financing mode for small and micro enterprises.

Private lending capital, as a long-standing form of capital, plays a vital role in the process of economic development, especially for the development of private economy.

According to the survey conducted by the relevant branches of the people's Bank of China in the six provinces of Zhejiang, Fujian, Hebei, Shanxi, Jiangxi and Henan, whether private financing is active or not is related to the level of private economy development. The existence of private financial activities is mainly to meet the urgent needs of people's daily life and the capital demand of private enterprises to expand the scale of production and operation.

In the economically developed areas of townships and rural areas, private financing is widespread.

There are many forms of private finance, ranging from simple forms of private lending to private banks, underground banks, and rural cooperative foundations.

The latter has certain regulations and constraints, and belongs to the pition product from informal finance to formal finance.

As the most developed private economy in Quanzhou, Fujian is also a region where private financial activities are active.

Quanzhou folk contain huge capital potential.

Private finance has played an important role in the development of Shishi's clothing industry.

Especially in the early stage of industrial development, due to the lack of formal financial supply, private financial capital has become the main force in the supply of clothing industry.

By 1989, private finance in Shishi reached its peak. The supply of private funds in the form of bidding was far beyond the credit scale of formal financial institutions.

At present, private lending is still an important source of funds for Shishi small and micro garment enterprises.

Because no need to mortgage, convenient procedures, private lending has a strong timeliness to meet the capital needs of small and micro enterprises.

However, private finance has never been the main source of capital for the development of enterprises.

The main reason is that its capital use and risk are difficult to control and may become a tool for illegal pactions.

At the same time, higher borrowing cost is also an important reason why SMEs can not rely on private capital for a long time.

According to this situation, in the long run, private lending can only be used as an auxiliary financing mode for small and micro enterprises. Finally, the financing of small and micro enterprises must be supported by the government, with banks as the main channel.

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Listing as an important financing mode for high quality SMEs

After years of development, China's capital market has gradually matured. Compared with bank loans, stock market financing has huge advantages in terms of capital size.

Moreover, the corporate governance mechanism of the capital market can make the operation of the enterprise more standardized, and also play a good role in the publicity of corporate reputation.

Therefore, listing and financing is the best choice for Shishi garment enterprises.

From the domestic listing, before this, the stock market scale of 30 million yuan in the main board, three years accumulated no less than 30 million yuan net profit threshold, a large number of small and medium-sized enterprises in the capital market outside.

With the opening of the SME board on the Shenzhen stock exchange in May 2004, China's SME financing channels have been widened.

Nevertheless, the number of garment enterprises that can raise funds in the domestic capital market is still small. Many shoe and clothing enterprises will be listed overseas.

The reason is that the listing conditions of China's main board market are too strict for small and medium enterprises, and the listing requirements of small and medium-sized boards have little substantive changes to the motherboard.

In October 2009, the gem was officially opened.

Judging from the listing conditions, the threshold of financial indicators of GEM has indeed decreased, but the requirements for business management are more stringent.

From overseas listing, Hongkong, Singapore, Frankfurt and other foreign capital market access threshold is relatively low, enterprises are relatively easy to get financing.

Therefore, enterprises should choose the listed capital market according to their own actual conditions, so as to realize the listing financing smoothly.

Attaching importance to the development of debt financing instruments for Non-Financial Enterprises

Non financial debt financing instruments include short-term financing coupons, medium-term notes, small and medium enterprises collective bills, ultra short term financing coupons and so on.

Since the issuance of debt financing instruments in 2005, as of the end of June 2011, short-term financing bonds have been issued over 2 trillion and 700 billion yuan, and the medium-term notes have been issued 1 trillion and 680 billion yuan. The collection of small and medium-sized enterprises has issued a total of 9 billion yuan, and ultra short term financing certificates have been issued 130 billion yuan.

From the above figures, we can see that non-financial debt financing instruments have made great contributions to the financing of enterprises in recent years.

As the largest garment industry base in China, Shishi has not yet issued a debt financing tool.

In view of the important contributions made by the debt financing tools in the past few years, the local governments should attach great importance to the large number of well regulated and profitable medium and large enterprises owned by the apparel industry cluster in Shishi, and guide enterprises to attach importance to financing through issuing non-financial debt financing instruments, and regard them as an important financing channel in the future.

To sum up, the development of Shishi's garment industry is accompanied by the continuous evolution of the financing mode. Different stages of development are accompanied by different financing methods. According to the characteristics of the current clothing industry in Shishi, bank financing should still be a medium and long term mainstream financing channel. Intergovernmental loan, listing financing and non-financial enterprise debt financing tools are important and beneficial supplements.